Former employees say issues plagued crypto company Celsius years

Problems at Celsius appear to have been simmering for years before the crypto lender filed for bankruptcy.

The crypto company saw a range of internal missteps leading up to its recent turmoil, according to former employees and internal documents CNBC reviewed. Multiple employees painted a picture of risk-taking, disorganization and alleged market manipulation.

“The biggest issue was a failure of risk management,” Timothy Cradle, Celsius’ former director of financial crimes compliance, told CNBC in an interview. “I think Celsius had a good idea, they were providing a service that people really needed, but they weren’t managing risk very well.”

The Hoboken, New Jersey-based company made headlines a month ago after it froze customer accounts, blaming “extreme market conditions.” It had attracted 1.7 million customers and $11.8 billion in deposits as of June. Celsius customers have told CNBC they were drawn in by a 17% yield the company was offering on crypto deposits.

Behind the scenes, Celsius would lend that money out to hedge funds and others willing to pay an even higher yield. It would also invest in other high-risk cryptocurrency projects, according to internal documents. Celsius would later split those profits with the customer. The model came crashing down along with the price of cryptocurrencies, which caused multiple companies to freeze assets and at least three to file for bankruptcy.

Cradle said he was part of a three-person compliance team between 2019 and 2021. The role required him to apply international finance laws to Celsius’ business. But resources were limited, he said.

“The compliance team was too small,” Cradle said. “Compliance was a cost center — basically we were sucking out money and not bringing any back in. They didn’t want to spend on compliance.”

One of the internal company documents CNBC obtained echoed this claim. It said when it came to assessing fraudulent cryptocurrency platforms, “there is not adequate compliance staff for the amount of users on Celsius’s platform as there are only 3 full-time individuals.”

Cradle said he was especially alarmed by conversations at a Celsius Christmas party in 2019 about a cryptocurrency created and used by Celsius, called the “cel” token. Executives said they were “pumping up the cel token” and “actively trading and increasing the price of the token,” Cradle said.

“They weren’t shy about it. They were absolutely trading the token to manipulate the price,” Cradle said. “It came up in two completely different conversations for two completely different reasons.”

Celsius, CEO Alex Mashinsky and company lawyers did not respond to multiple requests for comment.